Tuesday , January 22 2019
Home / Peter Cooper: Heteconomist / China and the Notion of State Capitalism

China and the Notion of State Capitalism

Summary:
There is sometimes an inclination in the west to depict China or the former Soviet Union as state capitalist rather than socialist or communist. At a time when China is going from strength to strength on certain macroeconomic criteria, some may wish to deny that this could have been achieved through socialism or communism and so instead claim China to be capitalist. At the same time, some may wish to distance notions of socialism or communism from what is perceived to be going on in China or what is perceived to have occurred in the former Soviet Union. It is conceivable that the questions “Is China capitalist?” and “Is China socialist?” could both be answered in the negative for the simple reason that not being capitalist does not automatically make a society socialist. Or, depending

Topics:
peterc considers the following as important:

This could be interesting, too:

peterc writes If the Robots Outdo Us

peterc writes State Monies are Fundamental to Modern Monetary Economies

peterc writes The Social Economy and the Potential Inherent in Currency Sovereignty

There is sometimes an inclination in the west to depict China or the former Soviet Union as state capitalist rather than socialist or communist. At a time when China is going from strength to strength on certain macroeconomic criteria, some may wish to deny that this could have been achieved through socialism or communism and so instead claim China to be capitalist. At the same time, some may wish to distance notions of socialism or communism from what is perceived to be going on in China or what is perceived to have occurred in the former Soviet Union.

It is conceivable that the questions “Is China capitalist?” and “Is China socialist?” could both be answered in the negative for the simple reason that not being capitalist does not automatically make a society socialist. Or, depending on our definitions, it is conceivable that both questions could be answered in the affirmative. Perhaps a society can be a mixture of capitalist, socialist, communist and other elements in the sense that its activities fall into these different categories in varying degrees.

If capitalist activity is defined to be activity subject to the ‘law of value’ – meaning that the activity is only viable if profitable – then we could think of societies engaging in proportionately more or proportionately less capitalist activity as being relatively more or relatively less capitalist.

All societies override profit considerations some of the time. The main way societies do this within the monetized economy is through government, including by situating some activity within a public sector. (Of course, the profit criterion is routinely overridden outside the monetary sphere such as within families. A voluntary sector may also be significant.)

The governments most able to override the law of value indefinitely are currency issuers, though all governments override the law to a considerable degree. A currency issuer such as the Chinese government is not impeded by the law of value unless and to the extent that it chooses to be. The Chinese government has no need – nor use – for profit or income (or value). By imposing and successfully enforcing payment of taxes in its currency, it compels acceptance of the currency. This enables it to command resources and activate production. This is so without regard to profitability. If this were not the case – if it were not possible to initiate activity at will without regard to profitability – then no economic system other than capitalism could ever be possible.

As already noted, all societies override the law of value to a significant extent, including the most capitalist of societies. Before profit can be produced in a capitalist society, various conditions must already be in place, including enforced property rights and rules governing the proper transfer of these rights. For profit-based activity to progress very far at all, there will also need to be extensive public infrastructure to facilitate the activity as well as benefits of basic research and education that can be commercially exploited.

These conditions of profitability are only established in the first place by overriding the law of value. The conditions are put in place despite the act of doing so not being a profitable thing to do. This does not just apply to the enforcement of property rights. To the extent that schooling is provided publicly, society is overriding the law of value. To the extent that there is publicly provided health care, transport infrastructure, basic research in sciences and the arts and much more, society is overriding the law of value.

If a society is considered capitalist to the extent that profitability is a prerequisite for activity, China is probably not capitalist. Public investment and public enterprise play a very strong role in the economy. Private enterprise that occurs is financed by publicly owned banks and often under the direction or strict regulation of government. The prominent role of government spending, public investment and public lending is likely a big part of why China’s macroeconomic performance outstrips the west in which governments hamstring themselves in various ways, behaving as if they are financially constrained.

Whether any of this makes China socialist, let alone on a path to communism, is a separate question. Increasing resort to the euphemism “socialism with Chinese characteristics” seems to signal, at least to an outside observer, that the prospects of socialism or communism in China may be quite bleak. We may have seen much the same story unfold before. Once government has used its capacity to drive growth, an opportunity is created for the results of all that effort to be placed in private ownership. This seems to be what basically happened in the Soviet Union. It is what happens in all countries on a smaller scale every time something developed in the public sector is subsequently privatized. It is not clear that there is much reason to be more optimistic about future prospects in China than anywhere else in the world.

Despite this, I think the tendency to refer to China as state capitalist is misleading. In a way it is too optimistic, viewed from a left perspective, because it might seem to imply that China’s system is vulnerable to the internal contradictions of capitalism and will eventually come undone as a result of these, creating a space for socialism. Within ecological limits, China – or any other country, if it chooses – can continue along its chosen path indefinitely so long as it remains willing to override the law of value as and when necessary. The only kind of society the law of value ultimately brings undone is the one attempting to obey it. A society that is willing to override the law of value can fail for other reasons, but its problem won’t be falling profitability, because it will have no need to care about that.

The term state capitalist also seems misleading because the notion of government appropriating surplus value – as opposed to a physical surplus – and functioning as a capitalist does not make much sense for a currency issuer such as the Chinese government. So long as the Chinese government remains capable of enforcing taxes and other obligations denominated in its currency, it will always be able to command resources and control or direct production if it so chooses. Surplus value, to a currency issuer, is meaningless. A physical surplus is of course created in production. But this is true of any society that has developed economically beyond the level of merely meeting physical subsistence requirements. Short of having no government, it is unclear how any system will not entail government playing a key role in what is done with the physical surplus.

It may be that China is socialist, just not in a way that some western socialists would embrace. Or it may be that China is neither capitalist nor socialist. Or perhaps China is in the process of transitioning from socialism to capitalism, as arguably happened in the case of the Soviet Union. Whatever is occurring, to me at least the notion of state capitalism seems inapplicable.

Leave a Reply

Your email address will not be published. Required fields are marked *